The Expenditure Impacts of London-based Individual Higher Education Institutions (HEIs) and their Students on the Economy of England: Homogeneity or Heterogeneity?

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Abstract

This paper replicates the analysis of Scottish HEIs in Hermannsson et al
(2010a) to identify the impact of London-based HEIs on the English economy
in order to provide a self-contained analysis that is readily accessible by those
whose primary concern is with the regional impacts of London HEIs. When we
treat each of the 38 London-based Higher Education Institutions (HEIs) that
existed in England in 2006 as separate sectors in conventional input-output
analysis, their expenditure impacts per unit of final demand appear rather
homogenous (though less so than HEIs in Wales and Scotland), with the
apparent heterogeneity of their overall impacts being primarily driven by scale.
However, a disaggregation of their income by source reveals considerable
variation in their dependence upon general public funding and their ability to
draw in income/funding from external sources. Acknowledging the possible
alternative uses of the public funding and deriving balanced expenditure
multipliers reveals large differences in the net-expenditure impact of London
HEIs upon the English economy, with the source of variation being the origin
of income. Applying a novel treatment of student expenditure impacts,
identifying the amount of exogenous spending per student, modifies the
heterogeneity of the overall expenditure impacts. On balance this suggests that
the impacts of impending budget cut-backs will be quite different by institution
depending on their sensitivity to public funding. However, predicting the
outcome of budget cutbacks at the margin is problematic for reasons that we
identify.